Bank of America Corp. (BAC) earned $4.2bn net income -- or 44 cents per share after preferred dividends including $402m to the U.S. government -- in Q109, compared with the fourth-quarter $1.79bn net loss reported in mid-January. The Charlotte, N.C.-based bank's Q1 profit more than matched the earnings posted for all of 2008, but credit loss and a weak mortgage business erased much of BofA's $36.1bn net revenue. The Merrill Lynch purchase from January 1 contributed $3.7bn to BofA's net income. But the merger came with its negative contributions, as well. The acquisitions of both Merrill Lynch and Countrywide added $6.4bn to the increase of no-interest expenses from  $9.3bn in Q108 to $17bn in Q109. BofA also strengthened its loan loss reserves to $13.4bn from $8.5bn in the previous quarter, adding to the offset in revenue. "The fact that we were able to post strong, positive net income for the quarter is extremely welcome news in this environment," said chairman and CEO Kenneth Lewis. "However, we understand that we continue to face extremely difficult challenges primarily from deteriorating credit quality driven by weakness in the economy and growing unemployment." BofA’s Mortgage, Home Equity and Insurance Services reported a net loss of $498m in the quarter, narrowed from $2.5bn in the previous quarter. Higher credit costs and no-interest expense offset the increased net revenue. The provision for credit losses rose to $3.4bn on the heels of housing market weakness, while no-interest expense increased to $2.7bn after the Countrywide acquisition, BofA officials said in the earnings statement. BofA funded $85bn in first mortgages and provided more than 382,000 borrowers with either purchase or refinance mortgages in the quarter. The bank made an estimated $16bn of these originations to 102,000 low- and moderate-income borrowers. BofA modified 119,000 home loans in the quarter, part of its commitment announced last year to modify more than $100bn in loans held by some 630,000 borrowers. To meet administrative needs associated with high demand for refinancing and first mortgage application volume, the company said it is in the process of adding approximately 5,000 positions. The company also touted more than 6,400 associates already in place to address increasing customer needs for loan modification assistance. BofA shares fell 15.76% and traded at $8.93 by mid-morning after the announcement. Write to Diana Golobay at diana.golobay@housingwire.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.